14 January 2016

4 Behavioral Science Reasons Why Recently Dead Artists’ Album Sales Sky-Rocket

A couple days ago, David Bowie passed and (apparently) his albums sell like warm bread during a famine. Nothing New! A few years ago, after Michael Jackson’s death the same thing happened (though, then with Michael Jackson albums; Bowie’s albums didn’t sell any better than before MJ’s death).

While from a Normative Economics point of view, this sky-rocketing sales phenomenon might seem irrational or, at least, puzzling, in fact, there are very good reasons (explanations) that come from behavioral science.

1: SALIENCE – Huge Media Exposure. While many music fans knew about David Bowie (read any recently dead musician), his name and music wasn’t in the media all that much in recent times. However, because he was (used to be) famous, the media from the USA to Romania and from the UK to Singapore mentioned his death accompanied by some kind of eulogy on his remarkable career.

When something is (very) salient, people tend to give it attention and even buy it.

2: SCARCITY. We are all suckers for things that are scarce. ONLY 1(2) ticket(s) left! When someone dies, they’re gone forever (famous quote by Captain Obvious), hence people want to not miss out on the last few albums by Bowie (or whoever).

This is particularly interesting. The fact that scarcity (not miss out on the occasion) motivates people to buy is well known for decades. The interesting twist is that music by a certain artist or any kind of information-product cannot run out. David Bowie’s music is already in digital format, which means that it can be multiplied endlessly. It goes the same with music from any other singer, with books, movies etc.

While the death of a singer means that (s)he will not produce more music, it does not mean that existing music will run in short supply. In fact, the music pieces that made someone famous (usually) are quite old by the time of the artist’s death. Thus, what is bought by many people is, in fact, old products.

Just as a note: New music by dead singers was released after their deaths… that is: previously unreleased old recordings (mixes).

3: SOCIAL CONTAGION. When the news gets out that lots of people are doing (buying) something, other people will follow (imitate) and do (buy) the same thing. This is more the case when the others have something in common with the decision maker (buyer). In this case, they are all Bowie fans.

4: STATUS ENHANCING THROUGH (COSTLY) SIGNALING. While owning a Bowie album was rather banal for most music fans, owning one of the (last) albums sold after his death is something worthy of talking about with friends, acquaintances, prospective mates (girlfriends / boyfriends) etc. In a nutshell, buying a Bowie album these days will give the buyer a reason (pretext) to brag (self-advertise) to relevant others.

RIP David Bowie and all other singers & artists who passed away! 

11 January 2016

The More You Buy, The More You Pay

Advertising for retailers often includes phrases such as The More You Buy, The More You Save. Yet the truth isn’t always so. While it is obvious that the more you buy, the more you spend, there is (should be) some truth / sense in the claim made by retailers.

Economic logic says that the more you buy, the less you (should) pay per unit. That is, if you buy 100 units of product X, the price per unit should be smaller than if you would have bought only 2 units of product X. This logic has its foundation in the concept of economies of scale.

Economic jargon aside, for most buyers it makes sense to buy a larger pack of X in order to pay less per ounce (gram) or other type of unit.

Retailers and manufacturers, however, know that most people are willing to buy in bulk (larger package) in order to get a better deal. Moreover, they know that buyers believe that if they buy larger packages, they get a better price per unit (save money!?).

Below are two examples in which buying a larger package, actually leads to paying more per unit of product.

The same trash bags cost more per unit if they are bought in a pack of 35, than in a pack of 20. A pack of 35 trash bags costs $5.49 (15.7¢ / bag), while a pack of 20 trash bags costs $1.69 (8.4¢ / bag).

It is the same product, same brand. You can take my word for it.

Going into a more appealing product category: beer, we find that Corona beer is cheaper in price per fluid ounce (ml) if bought in a pack of 18 cans (10.5¢ / Fl. Oz.) than in a pack of 24 bottles (10.7¢ / Fl. Oz.)